They
might be called “accidental” Americans, born during their foreign parents’
brief stay on U.S.
soil, or born abroad to American parents who long ago settled elsewhere.
After
lifetimes abroad, many in this group, whose total size is impossible to estimate,
had believed that because exemptions left them owing no U.S. income tax
they had no obligation to file returns; many have been tripped up by a
requirement that they still declare their foreign bank and financial accounts.
In
interviews, several people declined to allow their full names to be used for
fear of complicating already complex tax situations. “Some people have never
even lived in the U.S. ” and
learned belatedly of American tax responsibilities, said Sonia Stewart, a tax
accountant in Grayson , Georgia , who works exclusively with
overseas filers. “People are panicking.”
Some
typical laments include:
•Roy,
37, a lifelong Canadian resident and citizen whose dual-national mother fears
the U.S.
tax authorities will target the modest savings account the Canadian government
provides him as a developmentally disabled adult;
•Jonathan,
34, a teacher whose American parents migrated to Canada 39 years ago. He considers
himself 100 percent Canadian — a maple leaf is tattooed on his back — and
believed until last year that he did not need to file a U.S. return.
Tax advisers now tell him he must file eight years’ returns, at a cost in fees
and fines in the thousands, lest an eventual U.S. inheritance be jeopardized;
•The
teenage children of Peter Hallworth, a Briton married to a Swede living in
Malmo, Sweden; the children were born in the United States but lived there only
as infants. Mr. Hallworth, having heard horror stories, now expects to urge his
children, when they reach adulthood, to renounce the U.S. citizenship that up to now he
had treasured.
“It’s
a great shame that I’m being forced to take an action because of an illogical
tax law for a country which I’ve loved living in and I respect very much,” Mr.
Hallworth said in a phone interview.
Almost
every new tax law sows confusion and dismay, but new U.S. regulations — and
much tougher enforcement — are catching some Americans in legal nets designed
to snare terrorists, money-launderers or wealthy tax-evaders. Many Americans
overseas — not just the rich — have had to pay thousands of dollars in fees for
tax accountants or Internal Revenue Service fines.
The
increased pressure has produced results. The numbers of Americans filing the
Report of Foreign Bank and Financial Accounts, or FBAR, soared from 276,386 in
2009 to 618,134 in 2011 (failure to file, the IRS warns, “subjects a person to
a prison term of up to 10 years and criminal penalties of up to $500,000”).
A
growing number of Americans living abroad are renouncing once-valued U.S. passports.
Some 1,780 people gave up U.S.
nationality last year, eight times the 2008 level and the largest number in
more than a decade.
Virginia
La Torre Jeker has worked abroad as a tax attorney since 1986, and in Dubai since 2001. She
said the pain among American clients is high — 9 on a 10-point scale — and that
her Middle Eastern clients had always treasured U.S. passports that made travel
much easier than Lebanese, Pakistani or Jordanian documents. Now, “they’re
lining up to get rid of the U.S.
passport.”
Over
the past decade, the I.R.S. and Treasury Department have stiffened penalties
for failure to file and demanded more expansive filings on foreign holdings. To
bring non-filers back in the fold, the I.R.S. has offered modified amnesties.
In
2001, the agency had only 13 agents in its international operations unit, and
none specifically targeting what it calls “global high wealth.” By 2011, there
were 71 for global high wealth — and 856 for international operations, up from
259 just a year before.
“And it isn’t over yet,” Steven T. Miller, I.R.S. deputy
commissioner, said in March, pointing to plans to hire 300 more international
agents.
The
I.R.S. reports that 33,000 taxpayers entered the voluntary disclosure programs
of 2009 and 2011; on average, it collected $133,000 per taxpayer.
The
Internal Revenue Service recently reopened its voluntary disclosure program,
while reserving the right to increase penalties at any point — from the current
penalty of 27.5 percent of the highest aggregate balance in foreign bank
accounts or foreign assets during the eight tax years before disclosure.
“People need to come in and get right with us before we find you,” Doug
Shulman, the I.R.S. commissioner, said in January. “We are following more
leads, and the risk for people who do not come in continues to increase.”
In a
report in January, the I.R.S.’s taxpayer advocate, Nina E. Olson, criticized
the agency for not explaining the laws better to international payers; for
issuing regulations so complex that compliance can be arduous and costly; and
for issuing “potentially devastating penalties for even inadvertent
noncompliance.”
The
people interviewed for this article generally supported the crackdown but most
saw little logic in a U.S.
tax system, unique in the developed world, based on citizenship, not residency.
“What
you pay in tax should somehow be related to where you have police and roads and
health care,” Mr. Hallworth said. “Why pay taxes into a system if there are no
benefits that accrue?”
When
Jonathan, the Canadian teacher, spent four years in a third country, he had to
pay taxes only there. But the possibility of an inheritance from an American
grandmother prompted him to make himself right in U.S. eyes.
“It’s
not like a minor little fee,” said Jonathan. “We’re a young family with two
young kids, trying to kind of scrape by.” His parents, themselves facing
substantial tax penalties, have offered to help pay fines and costs; “for a lot
of people my parents’ age, suddenly retirement is looking a whole lot
different,” Jonathan said.
Ms.
La Torre Jeker said that most Americans abroad do their best to comply, even if
it is painful.
Guy
Setton, 38, born to an American mother and Israeli diplomat father, resided
only briefly in the United
States . For seven years, he has lived in Israel with his
wife and two children. He feels “completely Israeli” and does not even vote in U.S. elections.
But he keeps his U.S. tax
filings current, “simply because that’s what’s required,” he said by phone from
Raanana , Israel .
When
she learned she and her son were still subject to U.S. taxes, she said: “I was just
astounded, angry. It’s not the tax. I just really, really, really, really
resent being painted — all of us who’ve chosen to live in whatever country — as
tax-evaders, you know?”
Because
she has signature authority over her son’s account, she is taxable by the United States
for all grants and bond contributions that the Canadian government has
contributed to her son’s savings plan, she said.
On
top of that, the U.S. Consulate in Calgary told
her she could not renounce his citizenship because, it said, he lacked “the
legal capacity to form the specific intent necessary to lose U.S.
nationality.” Roy ,
his mother said, “does not understand the concept of citizenship.”
Source: The NY Times
No comments:
Post a Comment